Corporate Strategic Distinctiveness in the Aftermath of Natural Disasters
Existing studies have examined how monetary factors affect corporate strategic decision-making. I explore how natural disasters affect corporate strategic distinctiveness. Based on previous research on organisational adaptation and environmental scanning, the staggered difference-in-differences results show that corporate strategic distinctiveness decreases significantly after natural disasters, especially climate-related ones. Further cross-sectional analyses indicate that the negative impact of natural disasters on corporate strategic distinctiveness is more pronounced among firms that are managed by CEOs with early-life disaster experience and longer tenure. Moreover, private firms and firms with higher institutional ownership are also found to have experienced significant decreases in corporate strategic distinctiveness in the aftermath of natural disasters. Next, I investigate the underlying mechanisms that transmit the impact of natural disasters onto corporate strategic distinctiveness. Through the difference-in-difference-in-differences method, I find that natural disasters will affect corporate strategic distinctiveness through stronger precautionary motive, greater risk perception, and higher trade credit. Last but important, the baseline results remain unchanged after a series of robustness checks. Additional analyses suggest that firms will benefit from lowering strategic distinctiveness in the aftermath of natural disasters by enjoying higher firm value in the long term. In addition, firms tend to adopt more conforming strategies when disasters reoccurred. This study contributes to existing literature in the following ways. First, using natural disasters as a type of nonmonetary shock, I show how firms adapt to the uncertain business environment and build organisational resilience by adopting strategies consistent with the industrial standard. Second, the findings have practical implications for firms to understand climate risks and achieve sustainable development in the long term, and for policy makers to develop appropriate policies to promote economic recovery following natural disasters.